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India’s sugar output next season may rise to 36 million tonnes, says USDA.
May 31, 2023
India’s sugar production is projected to increase by 4 million tonnes (mt) to 36 mt in 2023-34 season (October 2023-September 2024), the US Department of Agriculture (USDA) has said. But the output could be affected in the case of El Niño turning out to be a strong event in Asia, say analysts.
'India’s production is estimated up 4 mt to 36 mt on higher sugarcane area and yields. Consumption is anticipated to be up on increased demand from bulk buyers and processed food manufacturers,' the USDA said in its bi-annual 'Sugar: World Markets and Trade' report.
India’s sugar production in the 2022-23 season has been estimated at 32.8 mt, down from 3.8 mt last season, by the Indian Sugar Mills Association (ISMA), a body of private mills. The output was initially estimated over 36 mt.
Impact in 2015-16
This season, India’s sugar production was affected by unseasonal rains affecting production in Maharashtra and Karnataka. ISMA will likely come up with its projections on 2023-24 sugar production in July.
Research agency BMI, a unit of Fitch Solutions, said in India, on an average, a climatic shift to El Niño brings about below-average precipitation levels during monsoon season. This is not always the case, though, it said. 'Looking at India’s sugar output during a strong El Niño 2015-16, domestic production declined sharply, falling by around 10 per cent,' BMI said.
Similarly, output was hampered in other important Asian markets, including Thailand, where output was also curbed by approximately 10 per cent during the last strong El Niño, it said, noting that a transition to El Niño could have significant consequences for major sugar-producing countries.
Global output seen up
Tarun Sawhney, Vice-Chairman and Managing Director, Triveni Engineering and Industries Ltd, said El Nino might have some impact. 'But from a sugar perspective, I think we will still have surplus sugar in the country. We will have enough sugarcane to meet the ethanol blending programme and we will have surpluses,' he told businessline. Triveni Engineering owns seven sugar mills in Uttar Pradesh.
The USDA in its report said global sugar production is forecast up 10.6 mt at 187.9 mt with higher production in Brazil and India more than offsetting a decline in Russia.
International sugar broking firm Czarnikov’s portal Czapp has projected the commodity’s production next season at 178.8 mt. This is lower than its April estimates as it expects El Nino to affect the crop in Thailand.
BMI forecasts that if weather conditions are favourable, there could be a 6.9 mt sugar surplus in 2023-24. However, during the 2015-16 El Niño, global production contracted by 7.1 per cent year-on-year, which applied to its 2023-24 production figures, would suggest that global production balance forecasts will swing from a surplus to a deficit.
Rising consumption
One of the fears as regards the 2023-24 season is increasing consumption and demand-supply balance. The USDA has projected global demand rising to 180.04 mt. This will leave ending stocks at 33.45 mt. Czapp sees consumption outstripping supply at 178.9 mt.
Indian demand is projected to top 31 mt by USDA, while it may export 7 mt against 6.1 mt this year. 'Exports are expected to rise only slightly on the likelihood that the government maintains export caps to control inflation,' it said.
In 2021-22 and 2022-23 seasons, India capped sugar exports to ensure ample supply in the domestic market. In 2021-22, exports were capped at 10 mt, though eventually 11.2 mt were shipped out. This season, exports were capped at 6 mt. 'If India does not export sugar next season, global prices could go up substantially,' said Sawhney.
Harvest may be hit
BMI said, 'Looking at Brazil, while an El Niño event would typically lead to increased rainfall in the world’s largest producer, as it did in 2015-16, heavy rain will delay the progress of the country’s harvest, which runs from May to December.'
However, as yet, the strength of the looming El Niño remains unclear, and much will depend on the severity of it, the research agency said. 'Should it be a strong El Niño, we expect global production to be further constrained and concerns to grow over global supply, ensuring that prices find further support,' BMI said.
thehindubusinessline.com
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